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Blockchain: Unlocking the Potential for the Airline Industry

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Blockchain: Unlocking the Potential for the Airline Industry

Abstract

The airline industry has always been dependent on intermediaries to provide critical services like settlement,
distribution, and maintenance among others. Airlines depend on the various intermediary agencies to manage and share a
lot of passenger and operational data with them. As the various intermediaries do not necessarily talk to each other, the
multiple data points such as passenger data, sales data, reconciliation, and baggage end up in silos. As a result, the data that
airlines could leverage has become very fragmented and spread across many independent IT systems. When multiple
disparate IT systems enable the numerous day-to-day operations, they bring multiple systems and processes along with
them. In addition, the intermediaries could impose their own rigid processes backed by undue reliance on older technology
making things non-homogeneous and complicated. Lack of transparency and management complexities are unfortunate
outcomes of the above scenario. To add to this, a plethora of intermediaries also brings a multitude of reconciliation and
processing steps, thereby increasing the overall cost per transaction. It is imperative that airlines focus on technology as an
enabler and make their systems and processes more homogeneous, transparent, accessible, and usable. Blockchain has the
potential to churn in dividends such as faster and automated transaction processing, smarter real-time sharing, and
minimal maintenance.

Does Blockchain Hold the Key?

According to the World Economic Forum “Blockchain
Technology also called Distributed Ledger
Technology uses cryptography to keep exchanges
secure. Blockchain provides a decentralized
database, or “digital ledger”, of transactions that
everyone on the network can see. This network is
essentially a chain of computers that must approve
an exchange before it can be verified and recorded.”

Blockchain technology has several key features that
result in unique advantages for the Airline industry.

Save for Later

Key features

Validation and Verification: Involves validation
and verification of the user and the transaction
using contracts, records, and other information

Block Creation: Allows creation of a new block
for a verified transaction and then the
transaction will be added to the ‘Digital Ledger’

Secure transaction: Ensures the new block
added to the Blockchain will be secure and
permanent

Data recorded in a Blockchain is decentralized, where
each set of the data record is termed as a Block. Each
Block is permanent and is secured with a timestamp.
Sharing of information is within the pre-defined
network. Blockchain provides tamper-free transaction
recording and utilizes Smart Contracts (digital
contract) – a code which will execute, based on
pre-defined triggers.

Benefits of Blockchain

Benefits and Advantages

Greater transparency: Once a block has been
created with the validated and verified
transaction, it is added to the ‘Digital Ledger’.
The Ledger is visible to the parties involved in
the Blockchain, providing greater transparency
and visibility of the transactions

Blockchain will help in streamlining multiple
processes by removing or reducing the role of
intermediaries and providing more control directly to
the airlines, its customers, and other suppliers. This
can enable the Airline Industry to find and implement
better, more efficient, and cost-effective ways of
doing business by innovating new processes or
improving the existing processes.

How and where can Blockchain be used?

While not all the processes of the intermediaries can be
replaced by Blockchain, however with its inherent
advantages and benefits, Blockchain could still be utilized
in multiple business areas to solve the industry’s
problems. Airlines across the world have already started
experimenting with and implementing Blockchain to help
improve their operations.

Simplified Accounting and Reconciliation:Blockchain could be used to increase
transparency and trust between the multiple
parties and enable automation, especially with
respect to the reconciliation of payments.

Frequent Flyer programs: Blockchain-based
loyalty programs allow customers to use airline
loyalty points with multiple retailers.
Networked Loyalty Programs with various
partners are based on outdated systems that
take months to award points after the
completion of the eligible transaction. Speeding
up this process and making it accurate
improves customer satisfaction. For instance,
the Singapore Airlines implemented the world’s
first Blockchain-based airline loyalty digital
wallet.

Baggage Handling: Blockchain is used for
baggage tracking and tracing by using the
Digital Ledger to make the information easily
available to multiple parties.

Identity Management: Blockchain can be used
with biometrics and mobile devices to verify
the identity of the passengers. This could
enable a smoother experience for the
passenger, as compared to the verification of
physical IDs at multiple checkpoints.

Cargo: Blockchain could be used to track and
trace shipments. The Digital Ledger would
allow the multiple parties involved in the
Export/Import/transshipment of goods to easily
keep track of the goods. Blockchain will enable
easier overall supply chain management.

Walmart and IBM are working together on
a pilot project to apply Blockchain
technology to Walmart's global supply
chain management system.

Brussels Airport (BRU) recently launched a
Blockchain-enabled application, to work in
conjunction with its cloud-based data
management platform. Blockchain will
centralize client communication.

Air New Zealand is exploring the uses of
Blockchain in its cargo management.

Passenger Compensation: Blockchain, through
the use of Smart Contracts will enable faster
processing of passenger compensation in case
of delayed flights/canceled flights/missed
connections.

AXA has a Blockchain-based insurance
product that automates the payment of late
flight compensation for air passengers.

Apart from the above-stated examples, Blockchain
can also combine with other emerging
technologies like IoT and Industry initiatives like
NDC and ONE Order to bring about even greater
efficiencies to the airline industry operations.

The other potentially significant area to use
Blockchain is the Global Distribution System.
However, with millions of transactions happening
on a daily basis and with millions of
agents/customers across the world, infrastructure
and technology have to mature significantly for
Blockchain to be effective.

However, Blockchain exhibits a lot of promise to
solve numerous challenges faced by agents,
airlines, and customers during the distribution and
fulfillment processes.

The NIIT Technologies Thought Board:

Blockchain: Unlocking the Potential for the Airline Industry

Where can Airlines Start to Harness Blockchain Technology?

The Airline industry has already started exploring and
adopting Blockchain and this will continue to
increase as the understanding of Blockchain
technology increases with time. There is a lot of
potential for Blockchain in the business areas where
‘Private Blockchains’ can be utilized. Private
Blockchains are cost-effective and faster with smaller
networks and require fewer coordination efforts.

Blockchain can help streamline processes and offer
more value to the industry and its customers. While
adopting Blockchain, it is essential for the Airline and and
the Travel industry to focus on the following key points:

Understand the business areas where Blockchain
has the maximum potential and identify the best
business use cases to start with.

The approach of Proof of Concept followed by
Proof of Value will help identify and target the
best use cases for development and
implementation.

Industry partnerships and collaborations will
help bring about greater synergies.

Technology partners will play a key role in
enabling Blockchain for business. The right
technology partner with the requisite
technical and domain understanding will help
ensure smoother implementations and
generate more value.

Looking Ahead

Blockchain definitely has the potential to
revolutionize the Airline industry. Instead of eyeing it
as a disruptive technology that brings about radical
changes quickly, it appears that its adoption will be
more phased and sustained. Blockchain, with its
benefits of transparency, trust, security, and
efficiency is earning a lot of attention from the airline
industry. However, it is just the right time for airlines
to cut through the hype and use this technology to
change the way they do business.

About the Author

Kanishka Sharma is Senior Business Consultant at NIIT Technologies. He is working with the Travel, Transport and
Logistics Practice and specializes in the Airlines and Travel Distribution sub verticals.

Anil Batra: SVP, Global Delivery Head,Travel and Transportation brings over 25 years of experience in IT and Business
Management. Being one of the longstanding travel sector experts in the company, he has been instrumental in incubating
and growing the travel related services portfolio. He has handled global engagements for some of best logos in the
industry. His in-depth knowledge of the domain coupled with a strong grasp of IT fundamentals has helped clients achieve
expected business outcomes through timely and process-centric intervention of technology.